U.S. natgas futures at 18-mth high near $4/mmBtu ahead of EIAs

Thu Mar 21, 2013 9:41am EDT

* Front month hits highest level since September 2011
    * Nuclear outages still running above normal
    * Cold weather remains on tap in long-term outlooks
    * Coming Up: EIA natgas storage data on Thursday

    By Eileen Houlihan
    NEW YORK, March 21 (Reuters) - U.S. natural gas futures rose
to their highest mark in 18 months early Thursday, boosted to
just under $4 per million British thermal units by continued
cold weather and expectations for a fifth straight supportive
weekly storage withdrawal.
    Lingering cold in consuming regions of the nation, a string
of supportive storage withdrawals and above-normal nuclear power
plant outages have combined to lift nearby gas futures by about
28 percent in just over a month.
   Traders and analysts expect weekly data from the U.S. Energy
Information Administration to show a draw of about 70 billion
cubic feet when figures are released at 10:30 a.m. EDT (1430
GMT), a Reuters poll showed. That would be supportive compared
with a flat year-ago week and a five-year average draw of 26 bcf
for that week. 
    The contract broke through several key resistance levels on
its run up from a five-week low of $3.125 per mmBtu hit in
mid-February, and was accompanied by steady gains in open
interest, a bullish sign indicating that new buying and not
short covering has been fueling the upside.
    But some chart traders said the contract was overbought and
due for a pullback with winter winding down soon and the 14-day
relative strength index climbing into the high-80s this week,
its highest in several years according to Reuters data.
    As of 9:28 a.m. EDT (1328 GMT), front-month April natural
gas futures on the New York Mercantile Exchange were at
$3.986 per mmBtu, up 2.6 cents, or less than 1 percent, after
trading as high as $3.992, the highest mark for a spot contract
since September 2011.
    Forecaster MDA Weather Services called for below, much-below
or strong-below normal readings for nearly the entire nation
except parts of the South in its one- to five-day outlook.
    The latest National Weather Service six- to 10-day forecast
issued on Wednesday again called for below- or much-below-normal
temperatures for a little more than the eastern half of the
nation and along the West Coast, with some normal readings in
other parts of the West.
    Nuclear outages totaled 22,600 megawatts, or 22 percent of
U.S. capacity, up from 21,700 MW out on Wednesday, 21,600 MW out
a year ago and a five-year average outage rate of about 18,100
MW. 
    
    ANOTHER ABOVE-AVERAGE STORAGE DRAW
    EIA data last week showed storage fell 145 bcf the prior
week, above Reuters poll expectations for a 134 bcf draw, the
year-ago drop of 66 bcf, and the five-year average decline for
that week of 74 bcf. 
    The data showed domestic gas inventories are now at 1.938
trillion cubic feet, nearly 19 percent below last year's record
high levels for this time of year, but about 11 percent above
the five-year average level. 

    The strong withdrawals have prompted analysts to sharply
lower estimates for end-winter storage, with some expecting
inventories to drop as low as 1.8 tcf, or about 4 percent above
average.
    A Reuters poll in mid-January showed most analysts had
expected stocks to finish the heating season at about 2 tcf.
    Baker Hughes data last week showed the gas-directed
drilling rig count rose by 24, the largest number in over three
years, lifted from the prior week's 14-year low to 431.
 

    But while the EIA last week lowered its growth forecast for
2013, it still expects marketed gas production to hit a record
high for the third straight year.
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